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Exhaustible Resource Allocation, Intergenerational Equity, and Sustainability

Published online by Cambridge University Press:  15 September 2016

Keith C. Knapp
Keith C. Knapp*
Affiliation:
Department of Soil and Environmental Sciences, University of California, Riverside
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Abstract

An OLG model with exhaustible resources and solar energy is developed, and equilibrium time paths are characterized numerically using recursive methods. For the parameter values considered, resource prices increase over time, and extractions, output, and utility decline over time until a steady-state is reached. Decreasing the intertemporal elasticity of substitution or raising consumers' subjective discount rate hastens exhaustion of the resource stock. Market equilibrium can result in much quicker use of the stock than social optimality under a constant discount rate, with consequent higher utility for early generations and lower utility for future generations in contrast to social optimality.

Type
New Issues and Fresh Approaches for Agricultural and Resource Economics
Information
Agricultural and Resource Economics Review , Volume 25 , Issue 1 , April 1996 , pp. 60 - 67
Copyright
Copyright © 1996 Northeastern Agricultural and Resource Economics Association 

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